CBO Says Stimulus Boosted Growth, Will Add More to Deficit

The economic stimulus package passed by Congress in 2009 raised gross domestic product, created jobs and helped lower the country’s unemployment rate this year, but also increased budget deficits by $830 billion over a 10-year span, the Congressional Budget Office said Wednesday.

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The Obama administration and Congressional Democrats said the American Recovery and Reinvestment Act, passed while the U.S. struggled to emerge from a severe recession, would save or create 3.5 million jobs while cutting taxes, investing in roads, bridges and other infrastructure, extending unemployment benefits and expanding aid to states.

Republicans opposed the program, citing high costs and questioning the projected impact on the economy.

The CBO report out Wednesday said the plan increased the number of people employed by between 1.2 million and 3.3 million, and lowered the unemployment rate by between 0.6 and 1.8 percentage points in the first quarter of 2011.

The stimulus package also raised gross domestic product, the broadest measure of economic output, by between 1.1% and 3.1% in the same period.

Unemployment ticked up to 9.0% in April, according to Labor Department data, while the Commerce Department reported first quarter GDP rose at an inflation-adjusted annual rate of 1.8% in the first quarter.

The stimulus package had its biggest impact in 2010, boosting GDP by as much as 4.6% in the second quarter of that year, while increasing employment by 1.4 million to 3.6 million in the third quarter, the CBO said.

By 2012 the act’s impact will be small, the CBO said.

“CBO estimates that the employment effects began to wane at the end of 2010 and continued to do so in the first quarter of 2011,” the nonpartisan office said in a report.

The CBO initially thought the effort would cost $787 billion from 2009 to 2019, but Wednesday bumped that figure to $830 billion, with most of the cost coming in fiscal year 2010.